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China's fuel ethanol industry has to consume
While the domestic fuel ethanol industry remains optimistic about its future, fueled by rising global crude oil prices, a recent report from Kearney, a leading global consulting firm, casts a more skeptical light. According to the "White Paper on Industry Research for China's Fuel Ethanol Industry," released on July 16, China’s fuel ethanol production is far less efficient compared to the U.S. The data reveals that producing one ton of ethanol in China requires over five times more water than in the U.S., and raw material consumption is 20% higher. This highlights the issue of high resource consumption and low production efficiency, which are major barriers to sustainable growth in China’s sector.
The white paper further states that China uses 12 tons of water per ton of ethanol, versus just 1.8 tons in the U.S. In terms of feedstock, China needs 3.3 tons of corn to produce one ton of ethanol, while the U.S. only requires 2.8 tons. Additionally, pollution emissions from Chinese ethanol plants are significantly higher. With the rising cost of corn and other food-based materials, China’s production costs are 17% higher than those in the U.S., yet the selling price of ethanol is 18% lower. If government subsidies are reduced further, high resource consumption could become a critical weakness for Chinese ethanol producers.
The government is expected to introduce new policies soon, setting strict limits on production standards. Future targets include keeping water usage below 5 tons per ton of ethanol, reducing coal consumption to under 500 kilograms, and imposing stricter regulations on chemical emissions. These requirements represent a significant challenge for smaller enterprises.
Industry insiders confirm that current production relies heavily on government support. For example, Jilin Fuel Ethanol Company receives a subsidy of 1,370 yuan per ton. With production costs around 4,000 yuan/ton and market prices at 3,200 yuan/ton, the company would suffer a loss of nearly 800 yuan per ton without subsidies.
To adapt, key players are shifting toward non-food feedstocks, aiming to cut costs, improve efficiency, and accelerate technological upgrades. Reports suggest that leading companies like Jilin Fuel Ethanol are gradually aligning their performance with international standards. As subsidies are phased out, innovation and sustainability will be crucial for long-term success in the industry.